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What Could Drive ArcelorMittal’s 1Q18 Financial Performance?

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ArcelorMittal’s 1Q18 earnings estimates

Previously, we looked at ArcelorMittal’s (MT) 1Q18 revenue estimates. In this article, we’ll look at the company’s 1Q18 EBITDA (earnings before interest, tax, depreciation, and amortization) estimates.

Analysts polled by Thomson Reuters expect ArcelorMittal to post adjusted EBITDA of $2.4 billion in 1Q18. In comparison, the company posted adjusted EBITDA of $2.1 billion in 4Q17 and $2.2 billion in 1Q17. Analysts expect ArcelorMittal’s 1Q18 EBITDA to rise on a sequential as well as a yearly basis.

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Looking at other steel producers, while U.S. Steel Corporation’s (X) 1Q18 EBITDA rose sharply on a yearly basis, it was lower compared to its 4Q17 EBITDA. Conversely, AK Steel’s (AKS) 1Q18 EBITDA fell on a yearly basis while it rose on a sequential basis. Nucor (NUE) reported a yearly as well as a sequential rise in its 1Q18 EBITDA.

Key drivers

Steel prices have been strong in ArcelorMittal’s key end markets, including North America and Europe, which should boost its 1Q18 profitability. Furthermore, some of the yearly automotive contracts it rolled over in January should also reflect a higher spot pricing environment.

ArcelorMittal’s 1Q18 average selling prices might show a yearly as well as a sequential rise that could benefit its 1Q18 profitability. However, the company could also burn cash in the quarter. Generally, ArcelorMittal generates negative free cash flow in the first quarter amid working capital buildup. 

Analysts polled by Thomson Reuters expect ArcelorMittal to post free cash flow of -$226 million in the quarter. Among other steel companies, Nucor posted negative free cash flow in 1Q18. However, Steel Dynamics (STLD) managed to post free cash flow of $127 million in the quarter.

In the next and final article, we’ll see how analysts rate ArcelorMittal ahead of its 1Q18 earnings release.

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